EUR 850.00 For Business Accounts Only

Morningstar | Atlantic Coast Pipeline Key to Our Growth Forecast

Duke Energy is one of the largest regulated utilities by market cap in the United States. Duke operates in constructive regulatory regions, particularly in Florida, which allows it to recover costs in a timely fashion through supportive regulatory outcomes. In the Carolinas, management will resort to more frequent rate case filings to recover capital costs. While not ideal, this has been an effective strategy. This regulatory support is a key reason for Duke's narrow moat.In 2019-22, we anticipate annual capital expenditures to average $8 billion. The company's highly visible capital program focuses on grid modernization, renewable energy, natural gas infrastructure investments and environmental remediation. We think Duke's highly capable management team can complete the program, which supports our 5% annual earnings growth estimate and is consistent with management 4%-6% expectations. Piedmont Natural Gas is one of the strongest growth areas for the company. We think management can achieve its goal to double the earnings contribution from gas utilities and infrastructure business in the next 10 years, based on customer growth and investment opportunities it continues to uncover. Key to our long-term growth expectations is successful completion of the Atlantic Coast Pipeline, or ACP. ACP was recently dealt another setback after the U.S. Court of Appeals for the Fourth Circuit denied ACP’s motion for clarification on the court’s stay of the revised U.S. Fish & Wildlife Service’s Biological Opinion. Duke now expects ACP to cost between $7 billion and $7.8 billion, up from the previous estimate of $6.5 billion-$7.00 billion.The ACP cost estimate assumes construction recommences on the full route in the 2019 third quarter and goes into full service in 2021. We expect the pipeline capacity contracts with subsidiaries of Duke, Dominion, and Southern Company allow for higher rates because of additional environmental costs, but we also expect regulatory pushback on allowed returns given the rising costs. Commercial power, the company's unregulated subsidiary, consists of high-quality renewable energy assets backed by long-term contracts.